Why Venezuela Doesn’t Get It Over With and Default

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Predicting when Venezuela will finally default has been a decade-long parlor game for bond buyers, but recent events add urgency to the exercise. After years of mismanagement, the country appears closer and closer to running out of money. Adding to investors’ concern is the increasingly anti-democratic turn of President Nicolas Maduro, whose move to rewrite the constitution and strip power from congress has been met with U.S. sanctions. In recent weeks, the country missed several small interest payments -- blaming snags in the payment chain due to the sanctions -- triggering concern among investors that the deadlines for two large, upcoming principal payments (one due Oct. 27, another due Nov. 2) will also be missed. Still, for all the turmoil, Venezuela has a track record of paying its debts, and investors who’ve held on through the worst of times have been rewarded with some of the world’s best bond returns.